The primary reason investors buy puts is to hedge against a drop in a stock's value. If you own 100 shares of a company at $50 and buy a put option with a $45 strike price, you have guaranteed that you can sell your shares for at least $45. Even if the stock crashes to $10, your exit price is locked in. 2. Market Volatility and "Black Swan" Events
The protection isn't free. To get this "insurance," you pay a . buying a put option would protect you from
The put expires worthless, and the premium you paid is the cost of your "peace of mind." The primary reason investors buy puts is to